A long-awaited settlement between big banks and state's attorneys general will help struggling homeowners.
The Federal government and state Attorneys General have reached an agreement with the five largest mortgage services to address mortgage loan servicing and foreclosure abuses.
The $26 billion dollar agreement is unprecedented and will provide financial relief to homeowners and establish significant homeowner protections for the future.
Attorney General Eric Holder, Department of Housing and Urban Development (HUD) Secretary Shaun Donovan, Iowa Attorney General Tom Miller and Colorado Attorney General John W. Suthers announced that the federal government and 49 state attorneys general had reached an agreement. It is the largest federal-state civil settlement ever obtained.
The five largest mortgage services, Bank of America Corporation, JP Morgan Chase & Co., Wells Fargo & company, Citigrouo Inc., and Ally Financial Inc. (formerly GMAC) will be held accountable for abusive practices and required to commit more than $20 billion towards financial relief for consumers.
Struggling homeowners throughout the country will benefit from principals and refinanced loans.
“This monitored agreement holds the banks accountable, it provides badly needed relief to homeowners, and it transforms the mortgage servicing industry so now homeowners will be protected and treated fairly,” said Iowa Attorney General Miller.
The joint federal-state agreement requires the mortgage servicers to implement changes in how they service mortgage loans, handle foreclosures, and ensure the accuracy of information provided in federal bankruptcy court. The agreement requires new servicing standards which will prevent foreclosure abuses of the past, such as robo-signing, improper documentation and lost paperwork, and create dozens of new consumer protections. The new standards provide for strict oversight of foreclosure processing, including third-party vendors, and new requirements to undertake pre-filing reviews of certain documents filed in bankruptcy court.
Mortgage service’s will be required to fulfill these obligations within three years. To encourage servicers to provide relief quickly, there are incentives for relief provided within the first 12 months. Servicers must reach 75 percent of their targets within the first two years. Servicers that miss settlement targets and deadlines will be required to pay substantial additional cash amounts.